Index of eight core industries up 6.7% in November 2014; :: IndiaNivesh

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Index of eight core industries up 6.7% in November 2014; Boost
came from higher coal and cement production
The combined index of Eight Core Industries (ECI), weight of 37.9% in the Index of
Industrial Production (IIP), stood at 166.2 in November, 2014, which shows
impressive growth of 6.7% y-o-y as compared to 6.3% y-o-y growth in October 2014.
The cumulative growth during Apr-Nov’15 was 4.6% as compared to 4.1% y-o-y
growth in Apr-Nov’14.
The impressive growth in November 2014 numbers was mainly due to positive
growth in Coal (+14.5% y-o-y), Cement (+11.3% y-o-y), Electricity Generation (+10.2%
y-o-y), Petroleum Refinery Products (+8.1% y-o-y) and Steel (+1.3% y-o-y) whereas
sectors which reported negative growth were Natural Gas (-2.9% y-o-y), Fertilizers
(-0.5% y-o-y) and Crude Oil (-0.1% y-o-y).
Conclusion:
Index of eight core industries accelerated to 6.7% in November 2014. Coal posted
the highest y-o-y growth, followed by cement. On a positive note, despite the coal
blocks yet to be allocated, the sector already indicates high growth levels showing
increased efficiencies of Coal India. However, Cement, on the other hand, grew y-oy
due to the favorable base. The surprise in the data was growth in petroleum
refinery products. While steel continues to be volatile, fertilizers, natural gas and
crude oil shrunk. The trend in core-sector growth signals an improved IIP in H2FY15.
We feel that the economy might be in the initial stages of a recovery. The area of
concern is the great degree of volatility in the headline number of index of ECI. In
addition, despite growth in the core, IIP growth has been constrained.
Overall, the increase in the pace of growth would also reflect in the index of industrial
production data of November 2014 as the eight core sectors have a combined weight
of about ~38% in the IIP.